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Royal Bafokeng gives oil and gas a boost in Saldanha Bay

Aug 13 2017 06:02
Justin Brown

African community investment company Royal Bafokeng Holdings is involved in two oil and gas projects in Saldanha Bay in the Western Cape that could result in a total outlay of just more than R4 billion.

The first project is the Sunrise Energy liquid petroleum gas (LPG) import facility, situated near ArcelorMittal’s Saldanha steel mill as well as Transnet’s iron ore handling facility, to which Anglo American’s Kumba Iron Ore rails its iron ore from its mines in the Northern Cape.

Royal Bafokeng holds a 30.6% stake in Sunrise Energy.

Phase 1 of the project, costing R1 billion, was commissioned on May 27 and was officially launched this week.

Other key shareholders in Sunrise Energy include the Industrial Development Corporation with a 31% stake, and the Public Investment Corporation with 29.4%.

Sunrise Energy CEO Pieter Coetzee said this week that the next two phases planned for the Sunrise Energy terminal would each cost R200 million, resulting in a total further outlay of R400 million.

A road-to-rail facility is planned, at a cost of about R50 million, that will allow LPG to be delivered by rail.

This will enable the distribution of LPG in the inland areas – as far as the Free State, Namibia and Botswana – by 2018.

Royal Bafokeng CEO Albertinah Kekana said Sunrise Energy’s LPG import and storage terminal was the largest in Africa.

“There is a need in our market for an entity that is preferably born of African ingenuity and skills ... in the provision of oil and gas infrastructure.”

Sunrise would be an independent LPG terminal founded on an open-access model, added Kekana.

“It will be free of conflicts of interest in terms of either being a producer or trader on the one hand, or a downstream player on the other,” she said.

The other Saldanha project in which Royal Bafokeng is involved concerns a R2.6 billion oil tanking venture, currently under construction.

Royal Bafokeng holds a 50% stake in this, while German company Oiltanking owns the other 50%.

The project is set for completion by 2019.

Kekana said: “When completed, it will be the only dedicated oil blending and storage facility in Africa.”

Regarding the Sunrise Energy facility, Coetzee said it was designed to meet LPG supply, especially in the Western Cape.

Phase 2 of its construction could take place in four years’ time, with phase 3 possibly getting the go-ahead in six to eight years’ time.

The timing of both expansions will depend on market demand.

Phase 1, which began operations last month, is set to generate a monthly throughput capacity of 17 500 tons of LPG a month, which should displace 400 megawatts of power generation and 5 500 tons of LPG storage space.

Coetzee said in July that the Sunrise facility’s throughput amounted to 7 000 tons of LPG.

Phase 2 will see the monthly throughput climb to 35 000 tons of LPG a month, and storage space will increase to 11 000 tons.

Phase 3 will see monthly throughput hiked to 52 000 tons of LPG a month, which is expected to displace 1 200MW of power.

Storage space will expand to 16 500 tons.

Coetzee said there was a huge opportunity for growth in the market as the only other LPG loading facilities in the country were in Richards Bay and Port Elizabeth.

The latter terminal is to be moved to Coega.

Construction on phase 1 of the Sunrise Energy terminal took 16 months.

During this time, 474 local jobs were created and 1 750 jobs were created in the downstream sectors when the facility began operations.

“For every 10 tons of LPG we put through the terminal, one downstream job is created,” Coetzee said.

Downstream jobs include those for terminal operators, gas installers and engineers.

“LPG for cooking and heating is very efficient. LPG is 20% to 50% cheaper than using electricity,” said Coetzee.

Two international aggregators bring LPG to Sunrise Energy’s terminal in Saldanha, and then about eight companies distribute the LPG locally.

Once all three phases of Sunrise Energy’s facility have been completed, 5 000 downstream jobs will be created.

The facility utilises a multibuoy mooring system, a subsea and overland pipeline that is more than 5km long, as well as storage and blending facilities.

Outside South Africa, Royal Bafokeng – via its subsidiary, Mining, Oil and Gas Services – is also involved in the Ghana Petroleum Mooring Systems terminal and the Horn of Africa pipeline in Ethiopia.

The latter is a 550km multiproduct fuel pipeline project that will supply diesel, petrol and jet fuel to meet Ethiopia’s growing demand.

Kekana said the Horn of Africa pipeline could cost $1.5 billion (R20.05 billion) to build, but that only about $40 million had been spent so far on the project’s technical and financial feasibility.

Minister of Energy Mmamoloko Kubayi said at the Sunrise Energy launch event that transformation in the LPG sector was of “great concern”, especially with regard to the participation of women.

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